AT-5904_professional and legal resp

AT-5904_professional and legal resp - Page 1 of 11 CPA...

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Page 1 of 11 CPA REVIEW SCHOOL OF THE PHILIPPINES M a n i l a AUDITING THEORY PROFESSIONAL AND LEGAL RESPONSIBILITIES Related PSAs : PSA 240rev, 250 and 260 PSA 240(rev) – The Auditor’s Responsibility to Consider Fraud and Error in the Audit of FS 1. The primary responsibility for the prevention and detection of fraud and error rests with a. The auditor. c. The management of an entity. b. Those charged with governance. d. Both b and c. 2. When planning and performing audit procedures and evaluating and reporting the results thereof, the auditor should a. Search for errors that would have a material effect and for fraud that would have either material or immaterial effect on the financial statements. b. Consider the risk of misstatements in the financial statements resulting from fraud or error. c.Search for fraud that would have a material effect and for errors that would have either material or immaterial effect on the financial statements. d. Consider the risk of material misstatements in the financial statements resulting from fraud or error. 3. The following are examples of error, except a. A mistake in gathering or processing data from which financial statements are prepared. b. An incorrect accounting estimate arising from oversight or misinterpretation of facts. c. A mistake in the application of accounting principles relating to measurement, recognition, classification, presentation, or disclosure. d. Misrepresentation in the financial statements of events, transactions or other significant information. 4. The term “fraud” refers to an intentional act by one or more individuals among management, those charged with governance, employees, or third parties, involving the use of deception to obtain an unjust or illegal advantage. Which statement is correct regarding fraud? a. Auditors make legal determinations of whether fraud has actually occurred. b. Misstatement of the financial statements may not be the objective of some frauds. c. Fraud involving one or more members of management or those charged with governance is referred to as “employee fraud”. d. Fraud involving only employees of the entity is referred to as “management fraud”. 5. The types of intentional misstatements that are relevant to the auditor’s consideration of fraud include I. Misstatements resulting from fraudulent financial reporting II. Misstatements resulting from misappropriation of assets a. I and II b. I only c. II only d. Neither I nor II 6. Fraudulent financial reporting involves intentional misstatements or omissions of amounts or disclosures in financial statements to deceive financial statement users. Fraudulent financial reporting least likely involve a. Deception such as manipulation, falsification, or alteration of accounting records or supporting documents from which the financial statements are prepared. b.
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AT-5904_professional and legal resp - Page 1 of 11 CPA...

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